The National Stock Exchange (NSE) on Monday cautioned investors against some fraudsters running illegal dabba trading with guaranteed returns to investors. The exchange said that these persons are not registered either as a member or authorised persons of any registered member of the NSE.
A police complaint has been lodged in this regard.
Cautioning investors, NSE asked them not to subscribe to any such scheme or product offered by any person or entity offering guaranteed returns in the stock market as the same is prohibited by law.
“Investors are cautioned and advised not to trade on such illegal trading platforms. Participation in such illegal platforms is at the investor’s own risk, cost and consequences as such illegal trading platforms are neither approved nor endorsed by the exchange,” the bourse said.
What Is Dabba Trading?
The term ‘dabba’ refers to a box or container used to store and transport goods, and in this context, it refers to an informal network of brokers who operate from small offices or even homes, using mobile phones or other communication devices to place trades on behalf of their clients.
Dabba trading is an illegal form of trading in shares, where operators of such trading rings allow people to trade in equities outside the stock exchange platform.
Dabba trading takes place outside the official stock exchanges. In this type of trading, transactions are conducted through unofficial channels or off-market platforms, which are not recognised by the Securities and Exchange Board of India (SEBI).
Why Dabba Trading Is Illegal?
Dabba trading is illegal because it is unregulated and involves fraudulent activities, such as price manipulation and insider trading. It also undermines the integrity of the official stock exchanges and can cause significant losses for investors who participate in it. SEBI has been cracking down on dabba trading, and those found guilty can face hefty fines and imprisonment.
The cautionary statements came after NSE found that the entitie, Shri Parasnath Commodity Private Limited, Shri Parasnath Bullion Private Limited, Faary Tale Trading Private Limited and Bharat Kumar (associated with Trade with Trust), were providing dabba or illegal trading platform with assured returns.
For any kind of disputes relating to such prohibited schemes, mechanisms such as benefits of investor protection under the exchange’s jurisdiction, exchange dispute resolution mechanism and investor grievance redressal mechanism administered by the exchange, would not be available to investors, NSE added.
(With PTI inputs)
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